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F I S C A L I M P A C T R E P O R T

SPONSOR Luna

DATE TYPED 2/18/05

HB 766

SHORT TITLE Health Care Facility Access Task Force

SB

ANALYST Hanika-Ortiz

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$0.1

Recurring

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Health (DOH)

Health Policy Commission (HPC)

Public Regulation Commission (PRC)

Office of the Attorney General (AGO)

SUMMARY

Synopsis of Bill

HB 766 creates a 12-member Health Care Facility Access Task Force to study the effects of the

merger or consolidation of health care facilities providing outpatient services in rural and urban

areas on patient access and the local economy. The task force would serve through October 31,

2005, and report its findings to the legislature by December 31, 2005.

Significant Issues

In addition to studying impact of mergers and consolidations, the task force would be responsible

to study:

•

the feasibility of requiring a facility to demonstrate the effect of a merger or consolida-

tion on patient access to care,

•

the impact on patients when mergers and consolidations of health care facilities occur in

rural areas,

•

the economic impact of mergers and consolidations of health care facilities on rural areas.

House Bill 766-- Page 2

PERFORMANCE IMPLICATIONS

HB 766 may impact the DOH Strategic Plan to look at ways to improve access to health services.

FISCAL IMPLICATIONS

It is unclear what agency will pay the task force members per diem and mileage.

If study is successful, there could be an administrative and fiscal impact on agencies and public

and private health care facilities providing outpatient services.

ADMINISTRATIVE IMPLICATIONS

DOH will provide administrative support with existing staff and resources.

TECHNICAL ISSUES

The HPC suggests defining the following terms:

•

Merge

•

Rural

•

Urban

•

Outpatient therapeutic services

•

Administrative support

•

Minority party

The DOH reports the focal point of the proposed study is health care facilities providing outpa-

tient therapeutic services. This is a broad category that could include a wide range of different

facilities: community-based primary care centers; rural health clinics; hospital outpatient clinics;

mental health centers; substance abuse treatment centers; outpatient surgical centers; and similar

agencies. Mergers and consolidations have different implications for each of these different

types of facilities.

Consider restricting the scope of the study to a narrower range of facilities.

Suggest an amendment to allow for Native American representation on the task force.

OTHER SUBSTANTIVE ISSUES

The HPC has the following comment from “Which Types of Hospital Mergers Save Consumers

Money”:

Some view points on mergers include:

o

Larger systems can provide consumers with more comprehensive health

care.

o

Mergers that occur in highly concentrated markets decrease competition

and lead to price increases, therefore may be detrimental to consumers.

o

Mergers may lead to geographic barriers to accessing health care.

House Bill 766-- Page 3

Other considerations for studies of mergers:

o

Markets may behave differently depending on the concentration of for

profit and nonprofit facilities.

A study of 3,500 short-term general hospitals involving 122 horizontal mergers

from 1986 to 1994 shows the following findings:

o

Most of the mergers resulted in price reductions of about 7 percent.

o

Market concentration level is related to the amount of price reduction re-

sulting from mergers. They appear to be negatively correlated – the higher

the market concentration tended to be, the lower the amount of price re-

duction was apparent.

o

Level of penetration by Health Maintenance Organizations (HMOs) within

a market also appeared to be positively correlated with price reduction as-

sociated with mergers.

o

Some other characteristics that seemed to be indicative of higher price re-

ductions relating to mergers included:

Lower occupancy level hospitals

Non-teaching status hospitals

Non-system hospitals

Hospitals of comparable size

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

HPC notes study findings could support future policy decisions on health care facility mergers

and consolidations that may be beneficial to the welfare of consumers. The study may also en-

courage further efforts for monitoring prices and quality of health care in relation to mergers and

consolidations.

Not enacting this bill may mean that policy makers and others are less informed of the impact

that mergers and consolidations can have on health care markets.

AHO/lg